State aid: Commission opens in-depth inquiry into state measures in favour of Estonian Air

The European Commission has opened an in-depth investigation into a number of public support measures granted by Estonia in favour of its flag carrier airline Estonian Air. At this stage, the Commission has doubts whether these measures are in line with EU state aid rules. The opening of an in-depth investigation gives interested third parties an opportunity to comment on the measures under assessment. It does not prejudge the outcome of the investigation.

Estonian Air has registered significant losses since 2006. In December 2012, Estonia notified to the Commission its plan to grant a rescue loan of €8.3 million to Estonian Air. The Commission has doubts that the rescue loan for Estonian Air is in line with the provisions of the EU guidelines on aid for the rescue and restructuring of companies. According to these rules, companies in difficulty can receive rescue aid only once over a period of ten years (according to the so-called "one time last time" principle).

Indeed, Estonian Air already benefitted from three capital injections of €7.3 million (in 2009), €19.9 million (in 2010) and €30 million (in 2011-2012) respectively. These measures were not notified to the Commission. While private shareholders participated in the 2009 and 2010 capital injections, the 2011-2012 injection was carried out exclusively by the State. Moreover, the sale in 2009 of Estonian Air's groundhandling business to the State-owned Tallinn Airport may have involved state aid to Estonian Air.

At this stage, the Commission has doubts that these four previous measures were carried out on terms that a private player operating under market conditions would have accepted. If they were not, they would involve state aid in the meaning of EU rules. The Commission will now investigate to either confirm or infirm these doubts. Should it be confirmed that one or more of the previous measures involve state aid, the Commission will then examine whether the aid can be found compatible with EU rules, in particular with the rules applying to the airline industry and to companies in difficulty.

Background

Estonian Air is the flag carrier airline of Estonia, based in Tallinn Airport. While initially it was owned at 66% by private investors, in 2010 the State increased its stake to 90% and in 2012 it reached 97.34%.

The Commission has recently opened other investigations into public support measures granted to national flag carriers, namely Air Baltic (see IP/12/1245) and Adria Airways (see IP/12/1246). The Commission also recently adopted decisions concerning Air Malta (see IP/12/702), Czech Airlines (see IP/12/981), and LOT (see IP/12/1243).

Public interventions in companies that carry out economic activities can be considered free of state aid in the meaning of the EU rules when they are made on terms that a private player operating under market conditions would have accepted (according to the so-called "market economy investor principle" – MEIP). If the MEIP is not respected, the public intervention constitutes state aid in the meaning of the EU rules (Article 107 of the Treaty on the Functioning of the European Union – TFEU), because it procured an economic advantage to the beneficiary that its competitors did not have. The Commission will then proceed to assess, whether such aid can be found compatible with the common EU rules that allow certain categories of aid.

Under the EU guidelines on rescue and restructuring aid, companies in difficulty may receive state aid under certain conditions. Rescue aid has a high potential of distorting competition in the EU internal market, as it artificially keeps companies alive that would have exited the market without such aid. It may therefore be granted only over a short period of time and in a transparent manner. Moreover, any one company may receive rescue aid only once over a period of ten years (according to the so-called "one time last time" principle).

The Commission has also adopted Guidelines on state aid to the aviation sector:

The non-confidential version of the decision will be made available under the case number SA.35956 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.